Planning for a Baby: Budget, Insurance, and Taxes
A new baby changes household expenses and may change your income during parental leave. Start with the costs you can estimate now, the health coverage you will need, and the deadlines that follow a birth or adoption.
Build a budget for the first year
Use your own expected costs rather than a national average. Childcare quotes, your health plan's benefits, and your employer's leave policy will give you a more useful starting point.
| Part of the budget | Include |
|---|---|
| Initial costs | Baby equipment, medical costs you expect to pay yourself, and adoption expenses where applicable. |
| Monthly costs | Childcare, diapers, feeding supplies, health premiums, and changes to housing or transportation. |
| Income during leave | Paid leave, any unpaid period, benefit changes, and the expected date you will return to work. |
If you are comparing work arrangements, look beyond gross salary. Compare take-home pay, childcare, commuting, health coverage, retirement contributions, and other benefits. Include the cost of replacing care that a parent currently provides without pay.
Secondhand purchases need a safety check. Review CPSC recall and product-safety guidance before using older baby equipment, particularly cribs. For a used car seat, follow the NHTSA checklist, including its crash history, age, labels, recalls, parts, and instructions.
Arrange health coverage promptly
Before the baby arrives, compare premiums, deductibles, expected out-of-pocket costs, and which doctors and hospitals each plan covers. Confirm how to enroll the child and keep a record of the request.
| Coverage | Enrollment after birth or adoption |
|---|---|
| Employer group plan with dependent coverage | Generally must allow at least 30 days after birth, adoption, or placement for adoption to request special enrollment. When enrollment is timely, coverage must begin no later than the event date. Check the plan's process and deadline. |
| Health Insurance Marketplace | Birth, adoption, or foster placement generally allows enrollment within 60 days after the event. Coverage can start on the event date. |
The Department of Labor's special-enrollment guidance and HealthCare.gov explain these rules. Enrollment is not automatic. Depending on eligibility, Medicaid or the Children's Health Insurance Program may also be available.
Review insurance and estate documents
Review your life and disability coverage against the expenses your household would need to meet if income stopped or a parent died. Consider debts, childcare, existing savings, employer benefits, and the actual policy terms when deciding whether coverage needs to change.
An estate-planning attorney can help you update wills, beneficiary designations, financial powers of attorney, and health-care documents. Discuss who would care for your child and who would manage money left for the child.
In Ohio, naming a proposed guardian in estate documents works within the probate court process. A will does not make someone the child's legal guardian automatically or override a surviving parent's rights. Ohio law distinguishes guardianship of the person from guardianship of the estate, so the care and financial roles need separate consideration.
Plan for education savings
A 529 education savings plan is one option for future education costs. Compare its fees, investment choices, withdrawal rules, and available state tax benefits. Earnings used for qualified education expenses generally avoid federal income tax, but the investments can lose value.
The SEC's introduction to 529 plans explains how they work. Choose a contribution that fits your budget and other savings needs; there is no need to base the decision on a prediction that college costs will reach a particular amount.
Check the tax benefits for your family
For 2026, the federal child tax credit is up to $2,200 per qualifying child. Eligibility depends on income, the child's age and relationship to you, residency and support rules, dependent status, citizenship or residency status, and required identification. The full amount is not automatically refundable. The IRS's 2026 limits and child tax credit guidance explain the amounts and requirements.
A child born late in the year may qualify. The residency test for a child born during the year considers the time the child was alive, along with applicable temporary-absence rules. Personal and dependency exemption deductions are no longer available.
You can request a newborn's Social Security number during the birth-registration process, as Social Security explains. For the child tax credit, you and the child need Social Security numbers valid for employment and issued before the return's due date, including extensions. On a joint return, at least one spouse must meet that Social Security number requirement; the other needs a timely issued Social Security number or individual taxpayer identification number. For an adoption, check each benefit's rules; an adoption taxpayer identification number does not replace the child's qualifying Social Security number for this credit.
If you pay for eligible care so that you and, if filing jointly, your spouse can work or look for work, review the child and dependent care credit. Earned-income, provider, filing-status, and other conditions apply. Expenses reimbursed through tax-free employer dependent-care benefits cannot also be used for the credit.